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(China Daily: Hong Kong Edition Via Acquire Media NewsEdge)
An outlet of Huawei in Nanjing, capital of Jiangsu province. Huawei Technologies Co Ltd earlier this year set a revenue target of $70 billion yuan by 2018, or annual growth of about 10 percent a year, after posting 8.6 percent growth last year. ZHEN HUAI/CHINA DAILY
Networking giant joins two others to invest $26.2m in Bristol-based chip designer
Huawei Technologies Co Ltd has made its first equity investment in a British technology company as the Chinese networking and telecommunications giant looks to boost its consumer business by tapping into the market potential of Internet of Things, said analysts.

The Shenzhen-headquartered Huawei Technologies has joined with Robert Bosch Venture Capital GmbH of Germany and Xilinx Inc from the United States to invest a total of $26.2 million into XMOS Ltd, a Bristol-based semiconductor company and a leader in intelligent multicore microcontrollers.

According to an XMOS press release issued on Monday, Huawei will be one of the three strategic investors, all of which gain minority stakes through the investment. However, the company refused to disclose details of individual investors' contributions or resultant shareholdings.

Huawei's overseas expansion moves have in the past encountered some turbulence. The company has long been a target of criticism by the US government and lawmakers who claimed that China is a source of cyberespionage.

Unlike the United States, European countries, especially the United Kingdom, are quite open to investment from Chinese telecom companies.

At the end of last year, Huawei said it would invest $200 million on a new research and development center in the UK. In addition, the company is working closely with BT Group, a British telecom service group, to expand a national broadband network that currently covers 15 million UK households.

XMOS, which was founded in 2005, is specialized in designing multicore microcontrollers, a key component for a wide range of next-generation products, including the Internet of Things. The company's intelligence chip can be used in electronic equipment and smart household appliances.

"This funding from major industry players alongside leading technology investors represents a resounding validation for our multicore technology and highlights the growing strength and importance of our business," said Nigel Toon, CEO of XMOS.

Steve Chu, chief strategy officer and vice-president of Huawei's silicon division, said his company will be working closely with others on a number of new projects, as Europe, especially the UK, is a region with advanced chip technologies and quickly emerging business innovation.

No details about the new projects that Huawei will work on with XMOS were imediately available. However, Zhao Hailin, an analyst at research firm IHS iSuppli, said that the investment in the British company signals Huawei's efforts to boost its consumer business.

"The chips produced by XMOS can be used in consumer electronics and smart household appliances. Many telecommunications companies, which are well-known by enterprise clients, are keen to boost their reputation among individual consumers," he said.

The consumer business, or the smartphone business, contributed one-quarter of Huawei's total sales in 2013. Huawei is now the world's third-largest smartphone vendor, but branding is still a major problem for the company as it seeks to win more clients.

Lin Wenbin, an analyst with IT consultancy Analysys International, said that it makes a lot of sense for Huawei to invest in a cutting-edge chip producer in Britain.

"In terms of developing the Internet of Things, a company needs to master technologies in three areas: information gathering, information transmission and application," Lin said.

"Huawei is a world-class company in information transmission. But chips are something that can be useful in all of the three areas," he said.

The Shenzhen-based company also said it expected to generate an operating margin of 18.3 percent in the first six months of 2014.

The company did not elaborate in its brief statement.

"Driven by increasing investments in LTE networks worldwide, Huawei has further solidified its leadership position in mobile broadband," Huawei's Chief Financial Officer Cathy Meng said in the statement.

Huawei's sales growth during the first six months, which the company said was in line with its expectations, comes after a 222 percent to 270 percent jump in first-half net profits that was flagged by crosstown competitor ZTE Corp last week.

ZTE attributed the growth to improving margins and revenue from new contracts for China's next-generation telecom network.

Last year, Huawei reported a 10.8 percent rise in its first-half revenue.

Huawei earlier this year set a revenue target of $70 billion yuan by 2018, or annual growth of about 10 percent a year, after posting 8.6 percent growth last year.